Banks dispute need for more ACCC power

The banking industry has moved swiftly to undercut the latest push for greater competition into the home-lending market.

In a sign of the hostile political climate to the banks, there are signs the government and the opposition could support a push to give more power to the competition regulator.

The Australian Competition and Consumer Commission wants more power to deal with price signalling ahead of rate rises.

Australian Bankers Association chief executive
Steven Munchenberg
said on Friday the ACCC had sufficient power to deal with collusive behaviour and said the proposal would result in a one-sided public debate on banks’ funding costs.

Treasurer
Wayne Swan
has indicated he may consider giving the ACCC more power to ensure competition in the lending market.

ACCC chairman
Graeme Samuel
told The Australian Financial Review on Thursday that recent discussion by
Westpac
and
Commonwealth Bank
about the need to raise their rates by more than the RBA benchmark bordered on price signalling. But the ACCC did not have the power to take action to stop it.

Under the Trade Practices Act, cartel arrangements are prohibited but court decisions have narrowed the meaning of an “understanding" between companies which has the purpose or is likely to have the effect of substantially lessening competition.

Mr Munchenberg said the extra powers would prevent banks from explaining interest rate rises and legitimately responding to questions.

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“What we and the banks are trying to do is explain to people why their mortgages might move differently from the RBA," he said.

“We think we have an obligation to do so. Our concern is the more you go down the path proposed there is a risk innocent discussion about banking issues will be caught as subtle price signalling."

He said the recent comments by Westpac and the Commonwealth Bank stemmed from comments or analysis from parties other than the banks themselves.

Earlier in the week, Treasury officials told a Senate estimates hearing they were worried about the dominance of the big four banks following the global downturn and were monitoring the local market closely. On Friday, Mr Swan responded to Mr Samuel’s comments, saying there was “absolutely no justification for any bank, whatsoever, to raise interest rates beyond any future Reserve Bank movements".

“The Gillard government will continue to look for ways to keep competitive pressure on the big banks, whether it’s helping smaller lenders contest the market by lending cheaper or by making sure the ACCC is always armed with all the powers it needs to keep the big banks honest," Mr Swan said.

Shadow treasurer
Joe Hockey
backed the move. He didn’t rule out a private member’s bill if the government did not act quickly.